As the U.S. commemorates Labor Day, we should consider how many Americans aren’t actively participating in the workforce and what to do about it.
The labor force participation rate was 66% in 2007, declining to 63.3% in February 2020. Today, it’s even lower at 62.8%. Although there are many reasons for this trend, including Baby Boomers retiring, one glaring cause that will continue to exacerbate it with time is the flawed safety-net system.
Labor Day was created to commemorate the many contributions of American workers, and rightly so. There’s an inspiring symbiotic relationship between the dignity individuals derive from working and the flourishing that the country experiences as a result. This is why it’s so concerning that the current structure of the many safety-net programs can disincentivize work-capable individuals from seeking, finding and keeping employment. Too often, these recipients become trapped in a cycle of government dependence.
Programs like Temporary Assistance for Needy Families (TANF) and Supplemental Nutrition Assistance Program (SNAP) have minimal work requirements. This can discourage users from seeking better-paying employment opportunities, especially if the increase in income reduces the payments from these programs, which is called a benefits cliff. With purchasing power decreased from ongoing inflation, dependence on these programs is growing.
There’s a high cost of these programs on recipients and taxpayers funding it, with little to show for it.
Anti-poverty efforts have cost taxpayers about $25 trillion (adjusted for inflation) since 1965 and more than $1 trillion annually. While the official poverty rate in America has barely changed since 1970, only six years after President Lyndon B. Johnson declared the “war on poverty,” other measures show substantial improvements in people’s livelihoods. But much of that is because of safety-net programs that boost people’s income at the expense of other taxpayers.
Ideally, a flourishing civil society with strong families, communities, nonprofits, churches and other institutions in civil society would render government assistance irrelevant. But we’re a long way from that vision being attainable. Until then, these programs need key reforms, and implementing empowerment accounts (EAs) would help.
EAs are designed to consolidate state-administered safety-net programs into a single account accessible through a debit card. While they initially focus on streamlining existing programs, their potential lies in gradually replacing most, if not all, other safety-net programs over time.
EAs incorporate a work requirement for work-capable adults, complemented by skills training and education. Recipients would also have access to financial literacy education, community-based case management and opportunities to build savings while enrolled in the program, helping reduce the benefits cliff.
An essential aspect of EAs is their adaptability.
The account’s government contribution would depend on current income, assets and dependents. Unlike current safety-net programs with income thresholds that create benefit cliffs, empowerment accounts would use a time limit while offering more flexible income limits for up to a year. This approach ensures recipients are motivated to achieve self-sufficiency within a defined period. Community-based case management, provided by established non-profit organizations, would connect recipients with crucial resources and foster connections within local communities.
EA’s structure of requiring participation from safety-net recipients would go beyond merely providing financial assistance to equipping them to sustain fiscal and employment stability. The result would not only mean taxpayer funds are more efficiently spent, but struggling individuals are equipped for independence, leading to a decreased poverty rate, higher labor force participation rate and a flourishing economy.
Too often, the government promotes mediocrity by quickly “rescuing” people from their situation without showing them how to maintain stability. But all individuals deserve to experience the irreplaceable satisfaction that comes from earned self-sufficiency.
While celebrating Labor Day, Americans should emphasize not lack of work but meaningful work that aligns with individual callings. By empowering individuals to regain their financial independence through encouraging labor force participation, we pave the way for holistic human flourishing.
Implementing empowerment accounts would mark a pivotal step towards promoting prosperity and reducing dependency on government safety nets.
Vance Ginn, Ph.D., is president of Ginn Economic Consulting, chief economist or senior fellow at multiple state thinks across the country, host of the Let People Prosper Show, and previously the associate director for economic policy of the White House’s Office of Management and Budget, 2019-20. Follow him on Twitter @VanceGinn.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller.